Post-Brexit: Significant Changes to UK Cross-Border Payments Regulation

By Kai Zhang, Philip Morgan and Judie Rinearson 

The EU Cross-Border Payments Regulation 924/2009 (as amended by Regulation 2019/518) (EU CBPR) has been “onshored” with significant changes into UK law following the end of the Brexit transition period (i.e., since 1 January 2021). The EU CBPR applied directly in the UK until 31 December 2020. Essentially, the onshored UK CBPR regime only retains the transparency requirements on currency conversion charges under the EU CBPR. This means that UK payment service providers (PSPs) no longer have to comply with other requirements under the EU CBPR.

With respect to the transparency requirements on currency conversion, PSPs must disclose, before initiation of a payment, currency conversion charges in the form of a percentage markup over the euro foreign exchange reference rates issued by the European Central Bank (ECB). While the requirements may appear to be straightforward, there are issues with interpreting some of the specific points.

For example, the lack of definition for “card-based transaction” results in some uncertainty on the scope of the relevant requirements. Further, all the requirements are drafted in a manner that suggests that they may only apply to transactions initiated by the payer themselves. This thus calls into questions whether these requirements should apply to transactions initiated by using a third-party payment initiation service (PIS), although the policy rationale would seem to point toward PIS-initiated payments also being included.

In addition, the ECB published an opinion on 25 January 2021 suggesting that the euro reference rates referred to in the EU CBPR should not be those issued by the ECB but instead should be appropriate rates under the relevant benchmark regulation. It remains to be seen whether or not the UK would consider a similar approach in this respect for the UK CBPR regime.

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